Hamas continues to spread the word that a deal is near for the release of kidnapped soldier Gilad Shalit in exchange for terrorists, but the terrorist party also may have an additional objective of using the issue to forge a unity agreement with the rival Fatah faction.

Hamas reportedly is considering a new deal for Shalit in return for significant changes in an Egyptian-sponsored peace pact with Fatah, headed by Palestinian Authority Chairman Mahmoud Abbas, whose militia lost a bloody war more than two years go that resulted in Hamas taking full control of the Gaza region.

Former Prime Minister Ehud Olmert, who vowed not to negotiate with terrorists for the release of Shalit, also declared he would cut off relations with Abbas if his Fatah faction and Hamas were to return to the days of a unity government. A Hamas-Fatah pact would signficantly strengthen the PA's political position in trying to force Israel to meet its demands for a resumption in talks for establishing a new Arab state within Israel's current borders.

In what may be another round of psychological warfare, a Kuwaiti newspaper on Sunday followed the lead of a Saudi newspaper and quoted Hamas sources that a senior Egyptian official recently visited Hamas officials in Gaza to iron out details on securing a deal involving Shalit. Hamas and allied terrorists kidnapped him more than three years ago in an attack on a checkpoint bordering the Gaza separation barrier.

The rumored deal includes 1,400 terrorists and prisoners, many of whom “have blood on their hands" by being directly involved with the murder of Israelis.

Israeli leaders have tried to keep a low profile on the issue of Shalit, whose “imminent release” has been rumored numerous times. However, President Shimon Peres told reporters in Egypt Sunday that “progress” has been made towards reaching an agreement for his release.

"Everyone knows there is progress and I hope it will come to something," he said after returning from Egypt.

The Dubai-based Al-Arabiya television network reported that “a German mediator has given Israel a list” of Arab terrorists that Hamas demands be released. A Kuwaiti newspaper stated that the key issue is 70 terrorists who are from eastern Jerusalem and hold Israeli identity cards even though they are not citizens.

Middle East researcher Dr. Mordechai Kedar of Bar-Ilan University told Arutz 7 last week that Israel never will agree to free terrorists from eastern Jerusalem because it would weaken the Jewish State’s sovereignty over the city and would allow the terrorists to encourage Arab Israelis to work against the country.

Fox News reported late Sunday night that Israel has approved 70 different Jeruslem-based terrorists than those originally on Hamas' list, but the Prime Minister's office responded, "This is not a done deal yet."